Amid the blitzkrieg of decisions from Washington, there is constant debate as to whether there is some grand strategy behind it all, or whether it is no more than it appears – a series of disjointed, chaotic acts. I lean towards the latter view. Destructive acts can have cascading effects that make them appear more farsighted than they are. But I have to acknowledge that, if you were looking for a strategy to bring the international aid sector to its knees, you would be hard pressed to come up with a better one.
It took just two acts. Turning off United States funding took out up to 30% of global aid. That’s too large a gap for others to fill. Even if their aid budgets had been healthy and growing, other donor countries would have faced impossible choices as to which countries, sectors or multilateral partners to prioritise. Taking out US funding also undermined the rationale for large aid budgets. The system rested on an implied burden-sharing logic: if all wealthy countries worked towards the 0.7% aid target, then ambitious agendas like the Sustainable Development Goals (SDGs) might be achievable. If the US is no longer a player, then the case for 0.7% – rather than, say, 0.3% – is much harder to make.
The second act was cutting the security guarantee to Europe. NATO’s Article 5 mutual defence clause may still be there on paper, but Vice-President Vance’s infamous speech at the Munich Security Conference and the ritual humiliation of President Zelenskyy in the White House made it clear that the US security umbrella was no longer to be relied on. European countries now face a generational project of building an independent security capability against the growing Russian threat, while continuing to prioritise support for Ukraine. The rising deficits and higher debt that will come with this project will force painful compromises, including to Europe’s cherished welfare states. Stepping back from the role of global benefactor is just one of many consequences. Already, we see planned cuts to EU and European bilateral aid budgets ranging from 15% to over 35%, with more to come.
The aid sector is now working its way through the stages of grief, with denial, anger and bargaining at the fore. But there is also emerging acceptance that the world has changed, and the beginnings of a new narrative of silver linings. For aid sceptics, this is a chance to do away with waste and corruption and focus on what works. For proponents of localisation, it is a chance to redress the capture of aid by Western firms and NGOs and put local actors back in charge. Thoughtful African commentators are recognising an opportunity to end aid dependency – not just financially, but also through a decolonisation of minds. Gyude Moore, a former Liberia minister, points out that no country ever developed by outsourcing its ambition to others. African Development Bank President, Adesina, observes that benevolence is not a sustainable asset class.
The idea that a smaller but better aid sector will emerge from the ashes is a comforting thought amid the chaos. But realistically, a systemic crisis is not a promising moment for reform. The brutal way in which the US cuts were implemented has sucked the liquidity out of the international humanitarian system. UN agencies, contractors and international NGOs are fighting for survival, rather than thinking through new ways of working. Developing countries are scrambling to find resources for essential health services and commodities, even as the World Health Organisation lays off thousands of staff. USAID was dominant in democracy assistance, and its demise will hamstring many of the think tanks and campaigning organisations in developing countries which could help chart a post-aid future. The history of exit from aid partnerships is not an encouraging one. Once policy makers decide on cuts, the tendency is for aid agencies to rush for the exit, rather than spend the resources – intellectual and financial – required for a responsible transition.
The time for thoughtful reform was when the aid sector was flush with resources, rather than on its knees. The current crisis will bring about change, inevitably, but at the end of a very messy and painful process.
One of the first consequences we will see is an economic shock for low-income countries. Poor countries already faced a major problem with accessing affordable development finance, as well as a growing debt crisis. During the pandemic and the global economic uncertainty that followed, international lenders fled to safer markets, leading to a sharp fall in finance flows to developing countries, especially in Africa. Higher interest rates and a stronger US dollar left many countries paying more in debt repayment than they received in new funding. According to UN analysis, 3.3 billion people live in countries that spend more on debt service than on education or health.
A sharp fall in aid flows will compound this crisis. For developing countries as a whole (including middle-income countries), aid flows are not a major source of development finance – much smaller than commercial lending, foreign direct investment or remittances. But for the poorest countries, especially those affected by conflict, aid remains vital – often the only viable source for funding for improving essential services and infrastructure. In fact, in the world’s most fragile contexts – including Afghanistan, Burundi, Somalia, Yemen, South Sudan and the Central African Republic – aid in 2023 was more than 20% of GNI. A precipitous withdrawal of aid – affecting not just direct support to citizens, but also jobs in the aid sector and the local goods and services it procures – will be a major economic shock. In the short term, the place beyond aid will be one of increased hardship and rising humanitarian need.
A global trade war would be a further shock. There has been much comment on the absurdity of punishing tiny, jeans- and diamonds-exporting Lesotho for its trade imbalance with the US. But a bigger question is whether the US has now walked away from its African Growth and Opportunity Act (AGOA), which provided duty- and quota-free access to the US market for a wide range of African exports. AGOA had been key to building the nascent textiles and garments sector in Ethiopia, Ghana and other countries, and to other efforts to link Africa to global value chains. Furthermore, if US tariffs take the wind out of China’s economic growth, Africa will be caught in the crossfire. China has been Africa’s largest trading partner for decades, and past economic slowdowns have meant lower prices for African commodities. If globalisation is now going into reverse, many developing countries will be forced to rethink their development pathway.
All in all, the place beyond aid looks perilous and uncertain. New possibilities will no doubt open up. But there will be real pain to get through in the short term.
